Credit Card Information Site

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Dear Creditnet: I just received information in the mail Saturday that Citi Platinum Select will now start charging an annual fee of $60. I have had this card since 1989.

Of course there are ways to avoid that fee, but should I just start looking for another credit card?

Answer: We’ve heard from several other Citi customers who received the same notice last week, but it doesn’t appear to be a change Citi is making across the board for all Platinum Select cardholders. At least not at the moment.

If you choose to immediately close the card and take your business elsewhere, your credit score will suffer a hit since your credit utilization will increase and your length of credit history may shorten. Those two factors alone account for almost half your FICO score.

However, that may not be a big deal if you aren’t in the market to finance a home or car in the coming months and have other backup credit cards waiting to take its place. So, if you can afford the credit hit for awhile and don’t necessarily need the open credit line, then go right ahead and cancel. I’m sure you can find a better way to spend $60.

Don’t forget to at least ask Citi to reconsider the annual fee when you call to cancel. You may be surprised at their response.

Now, some people might think $60 is a reasonable fee in order to bank rewards points for purchases, keep an open line of credit, and retain a higher credit utilization ratio. It all depends on your perspective and financial goals.

In addition, the notifications we’ve heard about have stated that the fee will be waived for anyone that spends over $2,400 on the card per year. If this is your primary credit card, that may be an easy target to hit over 12 months.

As the CARD Act of 2009 is set to take effect on 2/22, this is an issue all of us, regardless of credit history, may unfortunately get quite used to dealing with in the coming years. Other revenue streams continue to dry up for credit card companies, but the mighty annual fee isn’t going anywhere. And Citi, as well as other major credit issuers, will certainly be running tests to try and determine just how much American consumers are willing to take before moving on.

Photo by Andy Newson / FreeDigitalPhotos.net

In spite of all the consumer-friendly changes the CARD Act of 2009 will bring to the credit card industry, there’s absolutely nothing that will stop credit issuers from continuing to slash credit limits or close accounts whenever their little hearts desire.

For some changes, such as new annual fees or revamped rewards programs, they may need to provide you with 45-days’ advance notice, but there’s no such rule in the event of an account closure. In fact, they don’t even need to give you prior notice at all.

Have you ever pulled out your trusty credit card during a visit to the local grocery store, only to have it denied at the register? Most people have encountered an unpleasant situation like this at least once before. It’s certainly happened to me several times.

The cashier offers that strange look of disgust and says, “Sorry, your card was DENIED!” And then the first thing that always runs through my mind is “Oh no, did I forget to pay my bill?” Of course, I know that can’t be the reason because I never forget to pay my bill—ever!

So, then I find myself wondering if a fraud alert was placed on my account due to some suspicious charges or an actual case of identity theft. I quickly step aside in shame and call the customer service number on the back of my card to find out what’s up. Fortunately, it’s always been some sort of mix up that’s fairly easy to clear up after navigating through the first few levels of incompetent customer service reps.

I’ve yet to find out that one of my accounts has actually been closed without prior notice, but it’s apparently becoming more and more common these days. Common enough that no one seems to be safe, regardless of what your credit history is like. And for those of us who prefer to use credit cards over debit cards, cash, or any other method of payment for all our monthly expenses, this can create a big problem if we don’t have multiple backup cards to fill the potential credit void.

In years past it may have been perfectly fine to rely on just one or two credit cards. Credit issuers rarely closed accounts at all, including those that had been inactive for years. However, times have changed. If you don’t have several backup credit cards in 2010, you’re taking a big risk that one day you may all of a sudden have no available credit at your fingertips.

Don’t get me wrong. I’m all for simplicity, and having too many credit card accounts can become difficult to manage for some people. However, for me the only logical defense is to keep several backup cards active, which can be utilized in the event my favorite rewards credit card is terminated without notice for some random reason.

Remember—no one is immune. Whether you have good or bad credit, we’re quickly learning that anything can happen in the credit card biz these days. Better safe than completely credit-less.

Photo by Taberandrew

What would you do for a whopping $1.00 of new credit from your credit card issuer? Hmmmmm…let me see—nothing?

You certainly wouldn’t agree to move old charged-off debt to a new credit card just so you could start making payments and paying interest again, right? That would be absurd! That is, unless you were tricked into doing so.

Well, Capital One has allegedly found a way to dupe some unaware consumers into entering such a debt repayment plan by sending them solicitations disguised as offers for new credit cards. West Virginia Attorney General, Darrell McGraw, stated in a press release on January 22nd that “Consumers who had charged-off accounts with Capital One or other creditors were sent the offer, which required the consumers to agree to transfer the entire account balance of a charged-off account to a new credit card account to receive $1 of new credit from Capital One.”

I haven’t seen a copy of what this alleged offer looks like, but it’s got to be rather deceiving to convince any rational consumer to do such a silly thing. I can only imagine how masterfully hidden among many pages of fine print is the fact that you will actually only receive $1.00 of additional credit when you agree to the terms of the offer.

In addition, those who accepted were required to immediately begin making payments on the old charged-off debt before they could receive further increases in their credit limits. According to McGraw, “Capital One’s practice of offering nominal extension of credit, if and only if, the consumer agreed to pay off a debt too old to be sued on is tantamount to loan sharking.” At the same time, acceptance of the terms allowed Capital One to re-age the debts, thus restarting the clock on the statue of limitations while also charging interest and fees on debts that otherwise would have been untouchable.

Rest assured credit issuers will be dishing out their fair share of above-the-waist blows in 2010 as they seek to recuperate lost revenue due to CARD Act of 2009. And taking actions such as raising interest rates or cutting credit limits on customers who are late on payments are fair, above-the-waist blows in my book.

However, this alleged behavior by Capital One is essentially like dishing out a clean shot to the proverbial consumer groin—definitely a low blow! If you receive any correspondence offering what appears to be terms for new credit cards, be sure to read the fine print carefully and understand exactly what it is you’re agreeing to before making any quick decisions. And always keep in mind that if it appears too good to be true, it probably is. Credit card companies are “for-profit” businesses and are certainly not in the business of giving away free money.

Photo by Andres Rueda

Dear Creditnet: I received a credit card offer in the mail from the university I attended for graduate school. It’s a MasterCard issued by a major bank with no annual fee, and it also boasts no currency conversion fees for international transactions.

Is this a perk that’s common through other no annual fee credit cards as well? I travel overseas often, so this could really come in handy on future trips.

Answer: No, it’s actually quite uncommon for credit cards to not charge currency conversion fees. In fact, Capital One is the only major credit issuer left that still doesn’t charge additional fees for international purchases on any of its credit cards.

It’s frankly always amazed me that Capital One doesn’t advertise this as a major advantage over competitors’ cards, but perhaps that’s because it may be going away soon?  With the CARD act set to take effect next month, I’m sure they’re looking for any possible way to increase fee revenue in 2010.

Other popular cards, such as Citibank credit cards or Chase credit cards, currently charge a 2 percent fee in addition to the 1 percent processing fee levied by Visa/Mastercard for converting your foreign-currency purchase into US dollars.  If you use your credit card a lot when traveling overseas, then you know just how fast the additional 3 percent can add up. Looking over your billing statement after returning home from a trip can be quite a shocker!

Try comparing other terms of the credit card offer you received, such as the APR and rewards program, with cards offered through Capital One before making a final decision about which one to take on your next trip. In addition to not charging any foreign transaction fees, Capital One offers some great credit cards that give up to 2 percent cash back on purchases and have no limit on the cash you can earn—not a bad deal during times when cash is tight for many of us.

Photo by Andres Rueda

It’s always annoyed me that we can’t pay our taxes with a credit card for free.

I mean, come on—it’s 2010, and I still have to cut a check or set up a direct debit to the IRS each year. It just seems so old fashioned.

I would much rather use my credit card to pay online, rack up rewards points, and enjoy having an extra 30 days or so before coughing up the cash to pay my balance in full. Wouldn’t you?

But alas, I’m too cheap to fork out the 2.35% convenience fee that sites like OfficialPayments.com or Pay1040.com charge for paying your taxes with plastic. And the government is clearly too cheap to absorb the merchant card expenses like most retailers do.

The good news is 2010 will provide a new option for paying your taxes online. For the first time ever, American Express recently announced that cardholders will now be able to redeem membership rewards points when paying their taxes through the two sites mentioned above. When I heard this last week, I thought it sounded like a great move on the AmEx’s part. It seemed logical that there may be a lot of cash-strapped Americans these days who could really benefit from this sort of tax option during rough economic times.

The bad news is it clearly won’t make sense for the vast majority of cardholders. Here’s why.

For example, how many points do you think it would it take to pay a $2,000 tax bill? Are you ready for this? A mere 400,000 points! And since most AmEx credit cards reward cardholders with one point per dollar spent, you can easily do the math. I doubt there are many cardholders with a tax bill of $2,000 who have spent at least $400K on their American Express credit cards.

While I think this is a great concept and could certainly be a last resort for some big-time spenders with beaucoup points who have no option but to pay their tax bill with credit cards, I can’t imagine it becoming a popular use of points among the majority of American express cardholders. There are certainly more efficient ways of redeeming membership rewards points.

As for my AmEx points, I’ll take cash please.

In response to the CARD Act, credit card companies are desperately seeking to boost profits by resurrecting old fees and creating new ones.

The long-lost inactivity fee is one that’s been receiving a lot of attention in the media lately.  Use your card too much, and you end up in debt.  Use your card too little, and your credit issuer will slap you with a nasty inactivity fee for basically not being profitable enough.

Mark Fiore, political cartoonist/illustrator, obviously finds the whole situation pretty ridiculous.  He pokes fun at credit card reform and the industry’s response in this video by dubbing the credit card companies’ efforts to adapt as the “Safe Credit Revision Everyone Wins Undertaking”, or S.C.R.E.W.U.

And just in case credit issuers have run out of ideas for new fees, which I’m sure they haven’t, Fiore even provides some excellent suggestions.  Among my personal favorites—the “legibility processing fee for left-handers”, which will also apply to right-handers, and the “thought processing fee” for simply thinking about the word credit.

Enjoy…this is brilliant.

Photo by Photos8.com

2010 already looks like it’s shaping up to be the year of ever-expanding fees for credit cardholders.

While legislators are still celebrating and patting themselves on the back for passing the CARD Act of 2009, consumers, on the other hand, haven’t experienced much to be happy about at all. Credit limits continue to get slashed, interest rates are on rise, and credit issuers are resurrecting old fees or adding new ones in an effort to recapture lost profits.

The inactivity fee is just one of the newly resurrected charges that appears to be gaining more and more traction among credit issuers. Fail to use your card often enough this year, and you may find yourself getting whacked with a monthly fee for lack of use. And to make things worse, the fee could even be triggered after you’ve opted out of a change in terms and are essentially forced into inactivity. Of course, nothing in the CARD Act exclusively prohibits these actions.

According to a recent report released by the Center for Responsible Lending, consumers could pay as much as $36 in yearly inactivity fees. However, I’ve heard reports of banks testing much higher rates on certain percentages of their client base. Fortunately, I haven’t seen one added to any of my credit card accounts yet.

How about you? If you’ve been charged an inactivity fee or have seen one added to your credit card’s terms, let us know how much and from what credit issuer in the comments sections below.

The return of inactivity fees is just another reason why it’s a smart idea to use each of your credit cards at least once a month to pay a recurring bill or simply make a small purchase. You’ll not only avoid having to deal with complete account closures, but you’ll also avoid getting surprised by one of these nasty inactivity fees.

Photo by D Sharon Pruitt

Remember partying like it was 1999?

Yeah, that was ten years ago. Since then you may have been able to hide your collection of Limp Bizkit CDs, stop wearing jean shorts and change your “Rachel” hairstyle (frosted tips for guys), but unfortunately you can’t remove that barbed wire tattoo from around your bicep.

Show of hands —who else thought this decade would be dominated by Sisqo and his Thong Song (parts 1-5)? Ok, maybe I’m the only one.

Times flies. In some ways Y2K, boy bands, Bill Clinton and the tech bubble seem so far away. I now nostalgically look back at the stuff we “worried” about at the beginning of this decade and they seem rather insignificant.

We lived in the glory of a pre-9/11, pre-housing bubble/burst, pre-Afghanistan, pre-Iraq, pre-$140 oil, pre-financial crisis, pre-reality TV world. We were so much better off.

Or were we?

In looking back at this decade I can’t help but wonder what future generations will think of the pages we have added to the book of human history during the course of these ten years. Will my grandkids learn about the 2000s as the decade of terrorism and sub-prime loans or will they see it as the dawn of the internet age, the proliferation of accessible and cheap technology, instant global communication and emerging environmental awareness?

Although many technological advances such as the internet, email, digital cameras and cell phones were not invented in this decade, they became commonplace. If you’ve ever had a day at the office when the Internet was down or if you’ve ever left home without your cell phone, you’ve become acutely aware of how dependent we have become on these things.

These technologies have made it possible for our businesses to operate more efficiently, while simultaneously making us as individuals busier, but sometimes less efficient. If you’ve Facebooked, Twittered, watched YouTube or g-chatted with friends at work, then you know what I mean.

I think the thing that stands out most about this past decade is that our world has grown exponentially smaller. Not to get all Thomas Friedman on you, but more than ever our economies, communities, cultures and decisions are intertwined. Increasingly we are bound together by our technology and we have access to unlimited information, for better or worse.

Keep this in mind the next time you watch a video of Filipino inmates dancing to Thriller on YouTube.

Photo by Terren in Virginia

The team at Creditnet.com would like to wish each of you a joyous holiday season and a prosperous, debt-free New Year!

Oh, and whatever you do this year to celebrate, just don’t eat too much of the icing that comes with those pre-made gingerbread houses. That stuff is lethal.

The problem with our federal debt is that when…



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